tv Inside Story Al Jazeera February 17, 2014 11:30am-12:01pm EST
contestants strutted down the red carpet of long beach. and the winner of the contest, a three-year-old bulldog name pushkin. i'm stephanie sy, "inside story" is next. that's the "inside story." ♪ ♪ hello, i am ray suarez, comcast is an enormous company. the largest communications company in the world by revenue.
it owns nbc universal. comcast cable, e entertainment television, the golf channel, universal pictures, theme parks, and digital voice and broadband internet properties. time warner is another enormous company. it owns cable operations in 29 states, local news and sports channels, internet and cloud computing services. now the two, plan to become one, merging with the first and second largest cable providers in america to control a big share of the american cable tv market and put the other competitors in the shade. if you are watching us on television, you are, by definition, a cable tv customer and whether you get your service from comcast, time warner, or another company, this merger may have long-term impact on a product you buy. what this massive merger will mean for their competitors and the 10s of millions of customers who by cable internet and other communications services is the
"inside story." the two cable goliaths are planning to george forces by the end of the year. comcast would absorb time corner for some $45 billion worth of stock. >> i think it's an incredibly exciting opportunity for time warner cable customers. >> the move will first affect the two companies 33 million subscribers. >> the technological innovation that will be enabled by the two companies coming together i think can be truly spectacular. new products, better products, and just a faster pace of change. so i am incredibly excited about it and i think the opportunity for our customers is just terrific. >> negotiations between time warner and another cable company charter communications crumbled opening the door for comcast. charter had offered $38 billion. but as the two teams rejoice, the massive merger is raising questions from consumer groups. will the new cable provider
hinder competition and options for subscribers, comcast ceo brian roberts played down concerns thursday. as we look at any competition of which there is much in video, whether it's direct tv, dish, at&t. fios, verizon, this allows us to compete better by bringing our products in to new markets. >> time warner's ceo robert marcus agreed. >> no reduction in competition, improved customer experiences, and we think that this will clear all the regulatory hurdles and will get done. >> comcast is always a major player in broadband. the comcast deal brings new focus to the ongoing battle over net knew neutrality. net neutrality is in limbo right now after a u.s. court of appeals struck down f.c.c. regulations. the court ruled the f.c.c. does have regulatory authority, but
it used the wrong legal justification. so now the f.c.c. can rewrite the rules or congress can act. the concern is that comcast and other broadband providers could give preferential treatment to their own produced content and that critics say, could drive up the price for consumers. the planned acquisition comes at a critical time in the history of cable television overall subscriptions and ratings are on the decline, online video on demand services like net flicks and hulu are on the rice, out hold opting out of cable television are putting pressure time warner and comcast. time warner lost close to 1 million cable tv subscribers in 2013 and more than 5 million subscribers opted out of able cable overall 202010 and 2013. ♪ ♪ the merger that seeks to
join two big players in american communications comcast and time warner cable on this edition of "inside story ." joining us now craig aaron from new york, david a reporter from the new york times who covers mergers and acquisitions for the paper and deal book. and baron, a lawyer and president of tech freedom which is a technology policy think tank. david, let me start with you, you tweeted out to your followers, in surprise how quickly this moved along. was there no long mating dance before this announcement? >> well, these two companies have been in touch over the years. but what has happened over the last couple of months is that charter communications has really made a push to try get ideal done with time warner cable. time warner cable was never comfortable with the idea. charter would have to take on a lot of debt. they wanted to do a good portion
of the deal in stock. time warner believed that charter stock would not be that valuable currency. when rob marcus took over a as o in january, he reached out to brian roberts the ceo of comcast and he said let's restart the deal talks, over the last couple of weeks they proceeded but even they they couldn't get all wait there. only after brian roberts went out on a road show after fourth quarter earnings on january 28 and he heard from comcast's main investors that they, in account fa, factwanted ideal to be done. brian roberts came back 10 days or so ago called back rob marcus and said let's get it done. just in the last week the two sides hammered out final details. >> but there were those worries that you mentioned about charter stock this. deal, from comcast, is for all stock. >> rob marcus on the call today
said that's apples to oranges. he said charter took stock even with cash not as valuable as comcast stock. the reason is that charter was going to have to lever up so much, take on so much debt that the company really would be barely investment grade perhaps, comcast stock, on the other hand, is now going to be backed up not only by the largest collection of cable operator subscribers but also by nbc universal which they completed acquiring last year. >> let me go back to washington to baron, you heard earlier the executives from the two companies involved talking about hugh howe good this would be for the consumer . ceo ryan roberts from comcast called it in no way anticompetitive. is it good for customers. >> it is and he's right. there is generally only one cable company in a given market and they don't compete directly with each other. what we are talking about isn't
reduction in choices you simply have in some market time warner would be replaced by comcast. so comcast would be a larger foot print. the concern about mergers like this has never been about horizontal competition, it's been a sort of vertical concern. that is it's been a concern that maybe if a cable provider got too large, maybe they would have to have leverage over video programmers and it's important to note here, number one, that first of all, that cuts both ways in some respects that sort of leverage can actually very much help consumers because right now the reason the cable bills are going up is that the real power, the market power in this industry is really held by the content owners. they are the ones who are extracting more and more in royalties every year for cable champions and it gets passed on to consumers. if comcast gains leverage here it may help in that respect. the other concern is that a company like comcast might use
its leverage to favor its ona fill 80ed content or might be able to stop some other new cable market -- or program or champion from gaining scale. and it's important to know that the f.c.c. has twice tried to implement a 30% cap on the size of a single cable operator, it's twice failed it was both struck down in court because the f.c.c. has never suffered the cap ahead quickly. >> that figure is interesting. this new company with control roughly 30% of the cable market. >> and, indeed, that's very deliberate. the company said that they will voluntary divest, sale off some of the time warping cable subscribers in toured stay below the 30% goal. which is not a legal threshold, but it's basically what the f.c.c. would think could be a problem. so even if it was a problem we are not even there. >> craig aaron is this a benign ideal as yes just heard baron describe it? >> i don't think so.
i think this kyle deal will b deal would be a disaster, we'll see bills go higher and higher. we are talking about the largest cable company in the country the largest internet service provider in the company scooping up the number two cable company. this will give comcast immense amount of power over what we watch, see, read and download every day. i had i would say too much power. i don't think this deal? the public interest at all. i think comcast is moving aggressively here it's very important natural justice department and the f.c.c. scrutinize this deal deals like this are why we have antitrust laws, why the f.c.c. needs to measure is this deal in the public interest. i don't see how they are going to find that it is. >> wouldn't this concentration giving this company pricing power and also product offering power that other competitors simply don't have because they are all -- they are content
producers and service providers and control such a big share of the overall market. >> no one is saying that the deal shouldn'ting scrutinized and it certainly will. buffy think what's likely to happen is that the f.c.c. will find that the conditions that were impose odd comcast when it bought nbc several years ago, those conditions will simply be extended to time warner cable subscribers and i am surprised, because somebody like craig, who believes very strongly in the importance of the neutrality rules should see this as a victory the neutrality rules were struck down by the d.c. circuit even though the f.c.c. can force it in an informal ware way or issue new rules. comcast is subject to those rules and now 8 million more of time warner cable subscribers will be subject to them. those conditions are
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or aol bought time warner. comcast bought nbc universal or when google bought youtube. you need a score cord to follow it all. the news today is a huge play in cable. comcast wants to buy time warner cable for 4 $4 by billion dolla. number 1 takes over number 2 to create a bigger number 1. this merger is about a lot more than just cable t.v. and on our program today, we are discussing what it means for the business of media and for you, the consumer. craig aaron, we should talk about net neutrality. the internet is important to both of these companies? >> this deal in many ways is all about broadband. it's the future. comcast is the nation's largest internet service provider. time warner cable as a big footprint as we talked about earlier. so in the end, i think in many ways, this is about broadband. this is about an effort by
companies like comcast to keep typing that product, a very profitable company to them to their television services. if they can keep you subscribing to keep the content you want to see online, that's good for their business. for most americans, compacable companies and this cable company might be their only option. not in every market but in most places if you want truly high-speed internet, you are talking about the cable company. if this happens, that company will be comcast. >> how does net neutrality and the rules and the debate about the future of the regulation of the internet play into this corporate merger, baron? >> it's a red herring for two reasons. comcast is subject to, as i mentioned earlier, the net neutrality rules. they agreed to that when they bought nbc, and that condition runs until 2018. they might extend it here. even if they don't, the fact of the matter is the fcc didn't really lose the net neutrality case. they simply had their order struck down.
the fcc actually had the court grant them broad authority to regulate much more than they even tried to do with their open internet orders. the fact of the matter is that while i think the fcc should be more careful, they have broad authority to regulate. for that reason, i think that's precisely why you will see the merger go through, because if there is a concern in the future, the fcc can always address it then. and the conditions that are in place today are not just about net neutrality but about making sure that comcast doesn't leverage media content it bought from universal against other networks to make sure it doesn't discriminate against over-the-top video providers. those should allay the concerns here this means better broadband for time warner cable subscribers. comcast has upgraded speeds 12 times over the last 12 years. it offers faster speeds in many markets than time warner cable does. so, if what we are concerned about here is americans
getting better consumers. it's supposed to save 1 and a half billion dollars in efficiencies of running the two companies together david gelles, cutters. does this position the company in a different way to handle a public that's already starting product? >> certainly. and this is something that brian roberts, the ceo of comcast has been working on for several years. if you look back to the rationale of the nbc/universal deal, that was about creating a company that had both content and distribution. this now, you know, pushes the distribution side, but it impasse sizes the future is going to be over the web, not television pipes. >> the web enters a lot of homes via cable television? >> by far, the number 1 source
americans. it's their option if they want truly high speed broadband. >> that's the kind of power cable is going to have over what we watch, see, hear and read and their ability to interfere with that connection in the future after 2018, not that far down t the line s problematic, their ability to potentially impose data caps, their ability to, you know, slow down things like netflix and potential competitors, favor their own content. this is their own vision. this is what they have talked about when they are in talking to their fellow companies, when they are add trade shows. the reason there is a net neutrality condition on the comcas comcast-nbc merger is because comcast was caught blocking lawfully file sharing. they have a record of this t it's pretty cold comfort to me that comcast is now indicating on day 1 of this giant merger that, oh, no, no, no. we are going to respect net neutrality forever. don't worry. you can trust us. what you never here on the list of all of these great consumer
benefits that are coming from this merger are lower prices. >> never comes. because the only direction that cable prices have gone are up, up and up again. >> again, the concern has always been as i said earlier about vertical pressure. >> that's to say the fcc, congress, wasas always afraid if cable providers got too big they would have too much leverage over programming. i will stipulate that could be a concern. it certainly was in the 1990s when most cable channels were owned by cable operators but that number, that percentage affiliation is very low today. what we are really talking about is a situation where comcast is already has its hands tied to it can't leverage its own content. okay? what it can do is stand up -- >> for four years? >> for four years and it may be for longer. ebb wh-- even when that expires the fcc has rules and broad authority under the decision that the d.c. circuit handed down. there is anti-trust law.
the point i am making is simply craig is complaining about two problems, which i actually would agree with him on. the second problem he mentioned is the cable bills are rising. i would suggest to him that that is not necessarily because of cable companies. it's because the people that really have the power here are the programmers and the fact of the matter is that sometimes, it's easier to fight market power with market power. sometimes, that's the only way it can be done. a combined company could actually get better deals for consumers and, yes, you might in fact see prices fall or not rise as fast as they would have. >> we will talk about the power of the programmers after this break because this creates a company, this merger, if it goes through, that is powerful as a programmer as well. time for us to take a short break. when question come back, we will talk about the future of what you read, listen to watch ain your home. this is "inside story."
how we consume media in this country is changing at the speed of social media. comcast, the biggest player in cable is going to get much bigger with the acquisition of time warper. davis, you would trying to jump in before the break, sorry, go right ahead. >> there is, indeed, an arms race going on between the distributers and the content providers. one of the things that we learned recently is that discovery communication major provider of cable networks including discovery, animal planet, etc. recently considered doing a deal for scripts, another big network provider. one of the reasons they didn't do it is because they feel like they've got enough leverage now. what they said, what people close to that deal that almost happened said if the cable operators get any bigger we may have to consolidate further.
so this deal could spark yet another round of consolidation on the content side. that is just to say that this arms race is still going to rage for years and years. and to be sure it is driving up prices for cable subscribers, but looking at what the cable content providers have planned there is little reason to think that that is going to stop any time soon. >> craig, would this company, if the deal was going to go through, have to promise that it wouldn't play hard ball on channel placement, on carriage of different content provider offerings in the ways that they would have the power to really be muscular about what americans see on cable television. >> i think they would promise anything to get this deal done, but i think any merger condition of this sort has been really hard to enforce. as administrations change and different people are there we haven't really seen it. i think the advantages for comcast are in building up those
muscles. you know, if you hate the cable guy you're going to dislike the cable guy on steroids, and that's what this deal creates. for comcast it's getting rid of the a lot of competitive pressure. time warner company raising its rates regularly and saying it's absolutely because of programming costs. but if you're comcast you're happy to see those programming costs continue to rise because that just goes in your other pocket. i think this is really a situation where they may make a lot of promises and assurances. but for the cable customer, for the viewer this is a lose-lose situation where it will hit them in their wallet and leave them with fewer choices in the long run and put comcast in a powerful gatekeeper role over the future of the internet, over the future of the tv, and because of their massive size and reach they're going to be calling a lot shots. >> why wouldn't this combined company use its power in that way? that's one of the reasons companies get big, isn't it? in order to have market power
and control marketplaces for their product? >> sure, but number one they already greed when they bought nbc for a set of conditions that prevent them from doing what you just described. and after those exceptions expire, the fcc has broad authority to police those negotiations. what you're concerned about if you think the cable company is going to get bigger, it's worth noting that the cable's market share has decreased. in fact, comcast is not the number one movie distributer, that's the satellite company. and it's chipped away at the market over the years. and new entrance in the broadband markets such as verizon, google, which is building on its own fiber network, century link, this is where i agree with craig, we should be doing everything we
can to make sure that those companies have as easy a time as possible and don't have to go through burden some regulatory hurdles to roll out fiber. if that's the problem, we don't have enough competition in broadband, we can deal with that problem. if we spend the next six months that otherwise would be wasted arguing about this deal in place, if we instead encouraged broadband deployment we would encourage the market. >> we'll have a very good conversation in the future about what the future holds for people trying to get content into their homes. that marketplace is in flux. thanks to all of you for being with me today. that brings us to the end of this edition of inside story. in washington, i'm ray suarez.
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